In 2019, occupancy of natural gas storage facilities in Europe reached the highest level in recent years. By October last year, and in preparation for winter, 98% of available storage capacity was already committed, which is estimated (underground and LNG) at 1110 TWh (105 trillion cubic meters).
As expected, and with a mild winter, at the beginning of 2020 record levels remained unchanged (88% of capacity) that sounded the alarms for all gas producers supplying the old continent, especially US producers.
This year began with a storage occupancy that remains 15 points above its historical maximums registered in 2015. The graph below shows the behavior of the stored gas inventory during 2019 and 2020. The area between the blue and yellow curve (year 2011 and 2018) represents the range in which inventories have been managed for the period 2011-2018.
Sanitary measures taken to tackle COVID-19 pandemic has kept energy consumption in low levels. Spain, the main importer of LNG in Europe in 2019 have been considerably affected by COVID-19. Moreover, both Germany, with the largest storage infrastructure in Europe, and Austria implemented forceful measures to prevent the spread of the virus in their territory that resulted in levels kept as high as 70% of their storage capacity and are already starting to increase again.
Other countries such as United Kingdom, the Netherlands, France and even Italy, which delayed the application of sanitary measures, reduced their natural gas inventories to levels below 50% of capacity. UK in particular,has seen an accelerated increase in its inventories since the beginning of April.
First cancellations of shipments in June 2020
The impact of COVID-19 in European energy consumption, the drop in oil prices and the volatility in the LNG freight cost will bring as a result an unfavorable position of North American LNG producers with respect to the European and Asian markets for 2020.
The configuration of the North American LNG business model in Asia and Europe sets the price of this hydrocarbon several dollars above the main regional markers. In the case of the final price of North American gas in Europe (including regasification), it is expected to be between 5.5 to 6.7 $ / MMBTU for the period May – Dec ’20, while the main reference markers of natural gas price in Europe are forecasting between 2 – 4.3 US $/MMBTU for the same period.